OECD INCREASES IMPORTS, ALSO NET EXPORT SURPLUS.

Jun 5, 1986

OECD INCREASES IMPORTS, ALSO NET EXPORT SURPLUS.

GENEVA JUNE 3 (IFDA) -- Imports of manufactures from the third world into the OECD countries was rising faster than their exports, but so was the net export surplus of OECD countries on this trade, an UNCTAD official noted Tuesday.

Addressing the committee on manufactures, B.L.Das, Director of UNCTAD's Manufactures Division said the export surplus of OECD countries on this trade had risen from 27 billion dollars in 1970 to 133 billion in 1983.

In explaining the various reports to the committee, Das had earlier noted that the "search for a 'path to recovery' by industrialised countries and their desire to 'trade themselves out' of the worldwide recession have not so far met with much success".

World trade in manufactures, he noted, had declined 1.2 percent annually between 1980-83, though the manufactured exports from the third world still rose at an annual 7.5 percent.

But this was "a moderate increase" compared to the rapid growth of 26.5 percent achieved by these countries between 1970 and 1980, he noted.

Das said that third world share in world manufactures exports had risen from five percent in 1970 to nine in 1980 and just under 12 in 1983, when value of total manufactured exports from the third world had reached 124 billion dollars.

The OECD countries, he said, remained the most important market for third world exports.

In 1983, some 77 billion dollars or 62 percent of their total manufactured exports went to OECD countries, 42 billion or 34 percent to third world countries, and 4.6 billion or four percent to socialist countries of eastern Europe and Asia.

The trade in manufactures within the third world was taking place mainly within major regions, and the country pattern of this trade showed "the potential for increasing the trade in manufactures among developing countries".

The market share of the third world in total imports of manufactures by the 21 OECD countries had risen from 7.9 percent in 1980 to 10.4 percent, but this was largely the result of increase in market share in the U.S. (from 17.2 percent to 19.5 percent), Das said.

Their market share in the EEC countries as a whole had increased over same period only slightly from 5.9 percent to 6.2 percent.

But these figures, the UNCTAD official said, did not reveal the wide variation in export performance among third world countries.

In 1984, the third world countries of south and east Asia accounted for 63 percent, and Latin America for 26.7 percent, of all third world exports of manufactures to the OECD countries.

The corresponding figures in 1970 were 53.5 and 22.8 percent.

The share of Africa over the same period fell from 10.6 percent to 4.3 percent, that of western Asia from 2.9 percent to 1.6 percent, and of "other developing countries" from 10.2 to 4.4 percent.

At country level, there was also a high degree of concentration, with just 12 third world countries and territories in 1984, each having a manufactured export exceeding one billion dollars, accounting for 87 percent of manufactured exports of all of third world to OECD countries in 1984.

45 other third world countries exported each 100 million dollars worth, and together with the 12, they accounted for 98.1 percent of all third world manufactured exports to the OECD countries.

But nearly a third of these 45 had registered an actual fall in exports of manufactures between 1980 and 1984.

On the import side, the value of third world imports of manufactures from OECD countries had risen from 33 billion in 1970 to over 209 billion in 1983, but this was a decline of 10 percent since 1981 when it had reached 256 billion.

While the imports of manufactures of OECD countries from third world countries had risen faster than their exports to them, Das noted that the net export surplus of OECD countries on this trade had risen from 27 billion dollars in 1970 to 133 billion in 1983.

On the internal factors affecting export performance, Das underlined the Secretariat conclusion that for cost efficiency, that promotion of fewer infant industries at a time was more conducive to achievement of international competitiveness than wholesale import substitution.

Economies of scale and capacity utilisation was important for a viable industrial base, and hence there should be "a more discriminating choice of industry specialization", particularly in the relatively small third world countries.

Also, the social and infrastructure development objectives of public enterprises often raised cost of production of these enterprises.

While the public enterprises had to be assessed in the context of their overall social and economic effects, "greater transparency" in the calculation of opportunity costs of non-economic goals could encourage "greater consistency of government objectives and planning".

On export-orientation vs. import-substitution, Das noted that on basis of "static gains", in both cases there was need to avoid moving too far away from comparative advantage patterns, since it was difficult to achieve first growth and then efficiency.

But for "dynamic gains", such as external economies, horizontal and vertical intra-industry linkages and development of technological and innovative capacities, "there is as yet no systematic evidence which could warrant a general conclusion about the superiority of one or the other of these policy choices", he declared.

The poor expectations about future growth in OECD countries limited the scope for export-oriented strategy in the third world, and these prospects were worsened by tariff and non-tariff barriers imposed on third world exports, the UNCTAD official underlined.

International markets were also now characterised more and more "by oligopolistic structures" for many products, with a few small enterprises handling the bulk of world trade, and this situation was made worse by a wide range of restrictive business practices (RBPS).

On FDI, Das said that while this could have wide-ranging advantageous effects, it could at the same time "entail high direct and indirect costs for host countries".

"There is need now for more detailed investigation of the links between investment and trade flows and particularly for simultaneous analyses of policies towards trade and policies towards investment, since together they co-determine the location of global production and the patterns of future trade".